Why We Need Medicare

December 26, 1964

Today there are 15 million Americans over 65; by 1970 there will be 17 million. They need more doctoring than the majority of us; they are more prone to suffer from degenerative diseases affecting the heart, lungs, digestive tract and arteries. Treatment of those diseases tends to be prolonged and expensive. An average American couple over the age of 65 typically spends $312 a year on medical expenses other than hospitalization; and in any year the typical elderly individual has a 13-percent chance of being hospitalized. The brutal economic meaning of those high costs is that advancing medical science has endowed many elderly couples with more life than they can afford. Both life expectancy and medical costs seem destined to continue to grow. A person who attains a 65th birthday can nowadays reasonably anticipate living to 80. This upward creep of the number of long-living Americans has overburdened communities that seek to provide free or subsidized medical services to those who need them but can't afford them. The welfare departments, local hospital facilities, volunteer physicians, are all overstrained. The melancholy net result is that such medical care has become restricted and is provided for a rigidly defined group that is indigent and has to prove it.

Since the enactment of the Social Security Act in 1935, the federal government has provided financial assistance for medical care of the elderly through a variety of means—but principally Old Age Assistance. These programs have become inadequate, and in 1960, Congress included in a bill amending the Social Security Act a section establishing a new program to help elderly people needing medical care that they could not pay for by themselves. Title VI of that Act, known as Kerr-Mills, authorizes annual appropriation of funds from the general Treasury revenues for the purpose. States which want that federal money must individually enact programs of medical assistance for the elderly. The federal government contributes from 50 to 80 percent of the cost of the programs based on a formula designed to give a larger percentage to the states whose citizens have smaller incomes. The funds are disbursed by the Secretary of Health, Education and Welfare, after he is satisfied that a state has complied with requirements designed to prevent any sort of discrimination in the administration of the program. The Act states that services provided may include hospital, nursing home, physicians, nurses, laboratory, X-ray, dental and any other medical services recognized by state law. The Department of Health, Education and Welfare maintains a number of councils that are ready to advise the states on the type and quality of their programs; but the councils are purely advisory, and each state is free to determine its own program.

Thirty-nine states, the District of Columbia, and Puerto Rico have so far passed enabling legislation under the Kerr-Mills Act. Their individual programs vary considerably in scope, in eligibility requirements and in benefits provided. Consider the hospitalization provisions made by the participating jurisdictions. Twenty-three of these will pay for hospitalization, for varying lengths of time, that is made necessary by any illness. However, 16 states specifically limit the type of disease for which they will finance in-patient care. In some states only "acute" or "chronic" conditions justify subsidized hospitalization. In others, it must be a "life-threatening" or "contagious" disease. Some of the states require each specific expenditure to be approved by the welfare board. Not only are the permissible causes for hospitalization defined, but frequently the length of hospital stay is sharply delimited. Only 17 states permit more than 30 days of paid hospitalization yearly, regardless of the illness. Some states allow only 14 days in hospital each year—compare this with the medical fact that four weeks in hospital are regarded as necessary after a heart attack, a common ailment of the elderly. Yet in other states, the limit is only 10 days of hospitalization per illness.

Only 28 of the areas operating programs under Kerr-Mills have made provisions for nursing-home care. Nineteen of those 28 states specifically define the nature of the medical condition for which payment of nursing-home costs will be made, as well as the length of stay permitted. In some states nursing-home care is allowed only if it follows hospitalization. New Hampshire, for example, permits payment of nursing-home costs for 26 days after hospitalization for a "life-threatening" illness.

Twenty-seven states have included in their programs provisions for covering the cost of drugs. Medicines account for about one-quarter of the medical expenditures of the elderly. Unlike the doctor's fee or hospital prices, these cannot be adjusted according to ability to pay. In nine of these 27 states the drugs purchased by the Medical Assistance Act are restricted to those required to treat certain illnesses or by total cost.

Kerr-Mills permits direct payment of physicians' fees. Such fees represent another one-quarter of the health-care dollar of the elderly. But 27 states require the welfare department to appoint the doctor, determine where he may see his patient, and how often. In some states, physicians' services are provided only in the hospital, in others in the out-patient clinic as well. Home or office visits are often limited to specified illnesses. The welfare department is sometimes required to approve each payment of a physician's fee.

The vague and permissive guidelines established by Congress have thus resulted in state programs of a widely different character. Some states have very restrictive programs. Examples are Alabama, which provides limited hospitalization for specified illnesses, no drug or nursing-home coverage; and Oregon, which provides 14 days of hospitalization yearly, 26 days in a nursing home, no physician's services or drugs. This is in contrast to the unlimited benefits available in seven states: New York, Connecticut, Massachusetts, Iowa, Michigan, North Dakota, and Washington, D.C. These states had well-established comprehensive health programs before Kerr-Mills was passed; they have simply transferred many of the recipients of local welfare to a federally subsidized program. Two-thirds of the recipients of Kerr-Mills assistance live in California, New York or Massachusetts. Almost 90 percent of Kerr-Mills funds are spent in California, New York, Massachusetts, and Michigan.

The kind of benefits provided by the states is critical to an evaluation of the program. Of equal significance is a determination of who benefits by the program. Does the program provide for those who cannot otherwise afford adequate medical care? Eligibility tests established by the states vary widely. But examination of the standards adopted by the individual participating jurisdictions reveals that the couple with a $3,000 yearly income, and assets, exclusive of home and car, of $4,000, are everywhere ineligible for Kerr-Mills coverage. Indeed, some states limit assets to $800 and total income to $1,800 per couple. The median permissible income is $2,300, a figure which eliminates 52 percent of all couples over 65; and the median figure for allowable assets is $2,000, eliminating many more. Thus it is clear that Kerr-Mills, which was not designed for the wealthy, is likewise unavailable to the huge middle-income group, and serves only the medically indigent. While Kerr-Mills may shift the financial burden of such assistance from community to federal government, it affects the recipient little. All too often the same people are receiving the same medical care that was previously available.

Thus, state implementation of medical care programs under Kerr-Mills has produced three great weaknesses. Arbitrary definitions, such as allowable duration of hospital stay, have severely influenced what should be purely medical decisions. Eligibility tests bearing no relation to medical need have excluded most of those who require assistance. Finally, the program as implemented does not provide total medical care. What could have been in many ways a thoroughly satisfactory program is a failure.

Since Kerr-Mills has failed to answer the need, what other solutions are available? The AMA has claimed that individual resources and private insurance are adequate to fill the gap left by Kerr-Mills. Accepting for the moment the AMA's assumption that hospital costs constitute the whole problem, how does the family with an income of $3,000 and assets of $4,000, and so disqualified from Kerr-Mills coverage, provide for its medical needs? Are their own resources sufficient to provide for hospitalization? Just recall that each year there is a 13-percent chance that one of the elderly will require hospitalization. Hospital bed costs vary widely, but the average cost of an urban ward bed is $36 a day. Laboratory, X-ray, electrocardiogram, and physicians' fee are additional charges. The total cost of one hospital stay for, say, the standard four-week post-heart attack period would be in excess of $1,100. More than 25 percent of this self-sufficient couple's savings would be gone. Not getting younger or healthier, they would seem destined to join the medically indigent.

If the AMA is correct, private insurance must then satisfy the need left unfilled by Kerr-Mills and private resources. An appraisal of existing plans does not support that claim. Their value is compromised by a number of factors. In some cases the only available form of insurance is a combination hospital-surgical plan. This is usually prohibitively expensive (in Washington, D.C., $480 per year). This probably reflects the economic exigencies of a narrow base. These comprehensive plans frequently will not pay for medical costs arising from conditions existing at the institution of coverage. In other words the individual who has gall stones at age 65, when such a policy is instituted, may not obtain payment if it subsequently becomes necessary to remove his gall bladder. Chronic illness, which may later require acute treatment, is exactly the kind of problem so common among the elderly. In many areas, elderly people are given only a limited period each year in which to subscribe to the less expensive, simple hospitalization plans (Connecticut 30 days, and Washington, D.C., 15 days annually). Of greater significance, however, is the fact that benefits paid under these schemes usually fall short of meeting even the hospital bill. According to HEW figures, only 42 percent of the hospital bills rendered to those carrying private insurance are covered as much as 75 percent by that insurance.

Although these exclusions and limitations severely curtail the value of private insurance, the most telling argument against its efficacy is that it is too expensive for those most in need of it. The couple with a $3,000 yearly income, thereby ineligible for Kerr-Mills coverage, cannot afford it. According to government statistics, this couple's basic budget (including food $780, housing $720, clothing and cleaning $200, automobile and insurance $300, taxes $255, nonhospital medical expenses $312, newspaper, magazine, haircuts, entertainment $260) totals $2,827, and does not provide the $240 required to purchase simple hospital insurance. Only 54 percent of those over 65 have even that inadequate coverage. Only a quarter of them have insurance that is '"adequate" by the standards of the American Hospital Association. How frequently the cost is borne by children cannot be determined. It might be argued that an elderly couple ought to reduce its $5 weekly reading, haircut and entertainment allowance, or sell its car, to raise the necessary funds. Our affluent society should be able to do better. Through a broad-based system of social insurance, an occasional movie, dinner out, and modest vacation as well as hospital insurance ought to be within the reach of the elderly.

As existing provisions for financing health care needs of the elderly are inadequate, alternative measures are being widely discussed. One proposal, which received some support at the recent AMA meeting in Miami, suggests that the federal government subsidize private insurance schemes, either by granting tax rebates for the individual purchase of such policies or having the government pay premiums directly. The AMA decided not to support such a plan. Indeed, its inadequacies are manifest. Private insurance plans at present do not provide comprehensive medical protection for the elderly.

Another alternative, the King-Anderson Bill (Medicare), has attracted the widest support and seems likely, in some form, to become law at the next session of Congress. The AMA claims that King-Anderson is unnecessary since existing programs (Kerr-Mills, private insurance, and individual resources) adequately finance medical care for the elderly. It states that King-Anderson violates the sanctity of freedom of the doctor-patient relationship. Finally, the AMA attacks King-Anderson as inadequate.

No Federal Interference

The preceding discussion clearly refutes the first assertion. The second point is also fallacious. The King-Anderson Bill disclaims any intention of interfering with the practice of medicine. It specifically says that no federal official may construe this bill as providing authority to so interfere. It makes no provision for the assumption of responsibility for individual physician's fees. The bill is limited to payment for institutionally based services. Removal of financial considerations from the physician's decision to hospitalize a patient can only enhance the freedom the doctor enjoys in caring for his patient. The AMA takes exception to the stipulation that payment will be made only to appropriately accredited institutions. But the bill bases acceptability on accreditation by the AMA-sponsored Joint Commission on Hospital Accreditation. This could hardly be called undue federal interference. No doubt hospitals considered substandard by the AMA, and thus by the government, will nevertheless continue to exist. But it would be bizarre for the AMA to champion federal subsidization of patient care at them.

The AMA's final objection to Medicare, that it is inadequate, deserves closer attention. Briefly, this bill proposes to pay some medical care costs by broadening Social Security. It will cover all persons aged 65 and over, regardless of whether they qualify for other Social Security benefits. The principal feature of the bill is the provision for assumption of hospital and nursing-home costs. Eligible individuals may choose either 45 days of hospital care yearly without paying anything, or up to 180 days under a plan whereby the individual must pay up to $90 himself. The standard in-patient services, room and board, nursing service, diagnostic and laboratory studies, as well as medical care provided by interns and residents engaged in AMA-approved training programs, are all covered by this plan. Services by other physicians or surgeons are specifically excluded. Care in a nursing home, including all the standard features except physician's services, is provided up to 240 days annually. Out-patient services are also available, but on a more limited basis. No private physicians' fees are covered. Home visits by nurses are permitted up to 240 per year, when recommended by any licensed physician. Diagnostic studies in hospital clinics are provided in limited amount - again excluding the doctor's participation. Auxiliary services such as those of social service workers and physical therapists are provided in hospital, and on a limited scale as out-patient services. Payment for drugs is limited to those used in the hospital.

The rules for participation by hospitals and nursing homes established under King-Anderson are not restrictive. Hospitals and nursing homes must be accredited as already stated. They are furthermore required, when size permits, to maintain a professional panel, of the hospital's selection, to review regularly the merit of prolonged hospitalizations and make appropriate recommendations. Each hospital must have state-licensed physicians and nurses on the staff and provide 24-hour nursing care. All of the services provided both in and out of the hospital must be recommended by a licensed physician or nurse. Each hospital is to have bylaws, and clinical records must be kept. These provisos only reflect the current minimal standards of medical care employed to protect the patient.

A New Approach for the AMA

This summary of the King-Anderson Bill does, in fact, sustain the AMA's contention that it is inadequate. By essentially limiting coverage to institutional costs, it will cover in the neighborhood of one-third of the total medical care bills of the elderly. Organized medicine, however, does not meet its obligation merely by recognizing this flaw in the Medicare proposal. It must overcome the misconception that carping criticism is enough. If the AMA is to regain a meaningful voice, it must recognize the fact that the cost of medical care is beyond the reach of many older citizens, and seek a solution to that problem. The AMA has, so far, failed because it denies the existence of the problem.

A tone of implacable opposition did not always characterize the deliberations of the AMA. Another AMA resolution, dealing with the same subject, said, in part, "It is…of the utmost importance that physicians…abandon the attitude of unreasoning opposition which has characterized…professional discussions on [social insurance]…educate the American medical profession in the general principles of social insurance…the insurance laws dealing with all matters of medical aid [should] be prepared with the active cooperation and under the careful scrutiny of the profession. Blind opposition, indignant repudiation, bitter denunciation of these laws is worse than useless; it leads nowhere and it leaves the profession in a position of helplessness if the rising tide of social development sweeps over them." This quotation represents the tenor of the report of the Committee on Social Insurance adopted by the 1919 AMA convention. It was a call to the medical profession to make a positive contribution to social welfare legislation, recognized, even then, to be both necessary and inevitable.

The time for a positive proposal is now, if organized medicine is to influence "the rising tide of social development." Any such proposal should be consistent with the fundamental principles of modern medicine. Three pertinent fundamentals are: The total man must be considered by the ministering physician. Treatment must be tailored to the needs of the individual. And every man deserves medical care of the highest caliber. Thus, personal degradation through imposition of a means test to determine eligibility for medical coverage is inconsistent with medicine's concern for the total man. Medical need alone should determine coverage—all the elderly must be eligible. The second principle, individuality, demands that the patient and doctor select treatment unhampered by extraneous predetermined codes. To achieve this goal, the program must be comprehensive. Inclusion, as in Medicare, of some services or types of treatment {i.e., hospital care) and exclusion of others (i.e., home care by physicians) introduces an irrelevant financial factor into what should be a purely medical decision. A federal program which physicians can conscientiously support must provide hospital and nursing-home care, the services of physicians, surgeons, dentists, nurses, and auxiliary persons, diagnostic and laboratory studies, and drugs. All these goods and services must be available at the medically appropriate place. The patient, of course, must be free to select his own physician. To effect the third principle, highest quality medical care, this proposal should include utilization of professional specialty boards and local societies. These groups have traditionally set the high standards of medical practice.

These principles represent the area of greatest specific concern to the physician. There are, however, other important considerations. Professional fee schedules should be established by existing practice with provision for regular revision in cooperation with those concerned - in the same fashion as the AMA-endorsed Blue Shield and Blue Cross programs at present operate. The most equitable means to implement this aspect of the plan might be local or regional groups working within nationally established guidelines. Finally, medical care for the aged should be recognized as a national obligation, such as the conquest of space or the war on poverty, and financed similarly. The social security scheme, placing proportionally the greater burden on those with the smallest incomes, is inconsistent with this view. The direct income tax represents the fairest economic base.

Michael H . Alderman, M.D., attended Harvard College and Yale Medical School, and is in the US Public Health Service at the National Institutes of Health in Bethesda, Maryland. This article originally ran in the December 26, 1964, issue of the magazine.